The Department of Housing and Urban Development is increasing the annual mortgage insurance premium charged to borrowers by 25 basis points on all 30 and 15 year amortizing loans said the agency on Monday.
Detailed in the President’s 2010 budget, the increase will impact new loans insured by the Federal Housing Administration on or after April 18 and is is part of ongoing efforts to strengthen the the agency’s capital reserves.
“After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA’s capital reserves and help private capital return to the housing market,” said David Stevens, FHA Commissioner. “This quarter point increase in the annual MIP is a responsible step towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost effective mortgage insurance option for borrowers with lower incomes and lower down payments.”
The increase — does not apply to the HECM program — is estimated to bring nearly $3 billion annually to FHA’s Mutual Mortgage Insurance (MMI) fund, which had capital reserves of approximately $3.6 billion at the end of FY 2010. The administration projects that FHA will insure $218 billion of mortgages during 2010. As far as borrowers are concerned, on average, borrowers will pay approximately $30 more per month said HUD.
“This marginal increase is affordable for almost all homebuyers who would qualify for a new loan. Existing and HECM loans insured by FHA are not impacted by the pricing change,” the agency said in a statement.
Last year, HUD raised the annual insurance premiums charged to borrowers with FHA insured reverse mortgages from .5% to 1.25%.